I Hired a contracter to install Oak stair treads and risers on an existing stairway that had carpet on it. They installed the treads with a three and a half inch overhang on the nosing, is this going to be a problem? Is it possible the tread could break off. The treads are one inch thick.

I have come across this before and InspectorD is right. The reason for only one inch nose is anymore than that and you are running the risk of triping going upstairs. The contractor should of added 2-1/2" total to the risers face so you ended up with a 1" nose but need to see pictures of this to conform. But now you got me curious take a tape measure and measure the distance of the finished floor upstairs to the first tread coming down and again the measurement of the finished floor downstairs to the top of the last tread. These measurements should be the same.

Thanks for confirming my fears. I didn't think this was right. I do have photos. I measure the floor down to the first step and it measures 8 3/4 inches, the bottom step to the lower floor is 7 1/2 inches the steps in between are all about 7 1/4 inches that is measuring from the top of the tread to the top of the next tread. The contractor returned to install the spindles and hand rail only to discover that because the nosing overhang is so large the spindles will not line up with the original holes in the existing hand rail. I told them to stop working until we find the solution. I am thinking the stair treads need to be removed so the nosing overhang can be adjusted. I hope the treads will be able to be re-used after they have already been installed.

Oh, the steps have two spindles each and the one towards the back edge hits on the nosing of the step above. the blue tape on the steps has a center point marked on it transferred down from the hand rail existing holes with a laser plumb bob. there are seven steps that are open on one side that get spindles, the upper six steps have walls on each side

No problem, I know whats wrong. Your contractor is inexperienced and in over their heads. You will need to get a real finish carpenter out there to fix what they have done.
These are the folks that give us a bad reputation, if they did not know what they where doing, they could have at the least gone to a library and taken out a book on stairs.
This is just not professional to do. I wish them the best, everyone needs to learn somehow, but this one should not charge you for it.
They are trying to get the 10 inch tread by code for each stair. But these stairs are nonconforming and can never be made to meet code. Each tread needs to be cut down so there is a 1 inch maximum overhang. And it is what it is when finished. Talk to your local building official for more information.
Let us know what you do.

Actually, it seems the issue has been there all along. The contractor is only replacing the stair covering material. The issue of non conforming rise/run combo has been there since day 1 (existing stairway)(someone didn't cut the stringer correctly and/or tried to compensate/factor out a half step). The only liability for the contractor is to remove and cut some meat off the back side of the treads.